The Race to 10% Growth

Good morning from Ho Chi Minh City! Hello to new readers, and welcome to the latest edition of the Vietnam Weekly.

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GDP Growth Accelerates

Vietnam’s Q2 GDP growth came in at 8.4% year-on-year, bringing expansion through the first half of 2026 to 8.2%. This is the highest rate in six months since 2011, and an improvement from 7.6% in the same period last year.

The industrial and construction sectors contributed the lion’s share of this growth, unsurprising given the nationwide building campaign that is underway, plus the ongoing strength of manufacturing and exports.

Total trade in H1 was US$550 billion in value, with exports rising 21% year-on-year and imports jumping 37%. The U.S. remained the largest export market, while China remained the largest source of imports.

This translated into a US$16.7 billion trade deficit, something I flagged a few weeks ago and an unusual situation for this export powerhouse to find itself in. (For reference, the first half of 2025 saw a US$8 billion surplus.)

While out of the ordinary, there’s one driver of this deficit that is very positive.

That’s an increase in imports of machinery and equipment related to tech manufacturing, which is a good sign for the composition of future exports.

On that note, LG Innotek recently announced it will invest US$1 billion in a huge semiconductor packaging plant in Hai Phong. LG has had a presence in Vietnam for years, but generally focused on consumer electronics such as TVs and washing machines.

The other major deficit driver is the high cost of fuel and related inputs thanks to the Iran War, which might now be back on.

While 8.4% growth up to this point is impressive by almost any measure, it’s still well below the government’s 10% year-end goal, a target that will require expansion of over 11% through the back half of 2026.

That’s just about impossible, while domestic media has called out several of the usual suspects for holding things back: slow public investment (through June, just 25% of the annual target), regulatory bottlenecks, lagging consumer demand, and uneven performance between provinces (only nine managed double-digit H1 growth).

Speaking of consumers, it’s worth noting that inflation has accelerated, with the CPI averaging 5.25% in Q2, while the figure last year was just under 4.4%. Prices have certainly risen across the board this year, with blowout electricity bills for many households two months in a row.

On a final economic note - though one with little material impact - the World Bank upgraded Vietnam from a lower-middle-income country to an upper-middle-income status based on its 2025 gross national income per capita.

That's the week's economic picture. Below, a few stories you’ll struggle to find in English:
- The book on Hồ Chí Minh's years abroad that was pulled from shelves and the criminal charges its author faces.
- The U.S.-pressured IP crackdown, with over 2,000 cases in three weeks.
- Data Corner: 28,000 smuggled diamonds, plus the new rule that can bar foreigners from leaving the country over unpaid tax.

Paying subscribers, read on.